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Changing Jobs? Here's How to Make Your Benefits Last

Aug 24, 2021 4 min read Deb Hipp

Key takeaways

  • Make sure you understand your total employee benefits package.
  • You can continue health insurance temporarily through COBRA—at up to 102% of the premium.
  • Contact your workplace retirement plan provider to discuss options for your retirement savings.

 

If you‘re like many people during the pandemic, you may be reevaluating where you work. Maybe you‘re thinking of pursuing a new career in a field you‘re passionate about. Or maybe you‘ve decided it‘s time to find a job that pays more.

Whatever your reasons for changing jobs, you may experience a gap in employer-sponsored benefits when you make the switch. With careful planning, however, you can avoid a gap in health insurance or other coverage when you leave the company.

 

 

Understand your benefits

Many employers offer health insurance, paid vacation and other benefits. Before you make a move, ask your human resources department about your options for continuing benefits. Among those that could require action on your part:

 

  • Health insurance

    Health insurance is one of your most important benefits, as even a brief gap in coverage can make you vulnerable to high medical bills. Around 6% of Americans reported losing their health insurance when changing jobs opens in a new window since the pandemic began, according to a Commonwealth Fund survey conducted in March and April. More than two-thirds of them gained new coverage elsewhere, including 20% who did so from a new employer plan. Also, most (54%) said they went three months or less without health coverage.

     

  • Life insurance

    If you have life insurance through an your employer or organization—typically at a lower group rate than you‘d find on your own—you may lose it when you leave. Depending on the plan, however, you might be able to continue your group policy or convert it to individual coverage (often at a higher cost).1 As always, the key is to ensure you have enough coverage—no matter who provides it—to meet your needs.

     

  • Disability insurance

    Many organizations offer short- and/or long-term disability insurance. If you have either, contact your provider to discuss options for disability coverage after you leave your job.

     

  • Retirement plan

    If you‘ve saved through an employer's retirement plan, you may or may not be able (or inclined) to leave that money in the plan when you do. Your other options include rolling over the balance to a new workplace retirement plan; rolling over to an individual retirement account (IRA)—traditional or Roth, depending on which kind of account(s) you have now; and cashing out some or all of your account (besides owing income tax and a possible early-withdrawal penalty, you‘d be pulling funding from your future that's hard to recoup).

     

  • Paid vacation and sick days

    No federal law requires your organization to pay for unused vacation and sick days when you leave, but that doesn't mean they cant. If yours will compensate you for part or all of those unused days, consider using the money toward new health or other insurance to avoid a gap in coverage.

     

Explore health insurance options

Because health insurance is so important—particularly when you're between jobs—it‘s critical that you understand your choices. An employer group health plan is generally less expensive than a policy you buy from an insurer on your own. One in five of those surveyed by the Commonwealth Fund chose to keep their coverage via COBRA opens in a new window, which allows workers to continue group health benefits for a limited time when changing jobs. Just note that under this program, you may have to pay the entire premium—up to 102% of the cost to the plan.

If you opt against COBRA, you can buy coverage through HealthCare.gov opens in a new window, the federal health insurance marketplace, without waiting for the annual open enrollment period (usually from Nov. 1 to Dec. 1).

To cover a gap between workplace coverage, you could also opt for short-term health insurance from a private insurer outside the federal marketplace. But do your research before you buy, as these plans can have limited coverage and high out-of-pocket costs.

 

What you can do next

Once you understand the full financial picture of your employee benefits—whether you plan to change jobs or already have—decide how to continue or obtain health insurance, life insurance and disability insurance without a gap in coverage. Contact your 401(k) or other retirement plan provider to discuss options for rolling over assets to a new employer's plan or a traditional or Roth IRA.

Footnotes

  1. 1 Susan J. Wells, “What happens to your life insurance when you leave a job?” Bankrate, April 6, 2021(bankrate.com/insurance/life-insurance/lose-life-insurance-after-quitting-job/)

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